States Reducing Unemployment Benefits

States Reducing Unemployment Benefits

JEFFERSON CITY, Mo. (AP) -- When Demetrius White recently lost his job as a $10-an-hour forklift driver loading pallets of shampoo, he applied for unemployment benefits to help support his family.

That aid will not last as long as it once did, because White is among the first group of people affected by a new Missouri law reducing the duration of jobless benefits. His $200-a-week checks will last no more than three months — just half as long as what has typically been available.

"That's a dramatic change, really," White said. "Thirteen weeks, I don't know if I'll be able to find a job."

States traditionally have offered up to half a year of aid for the unemployed as they search for new jobs. But since the end of the Great Recession, eight states have reduced the number of weeks that people can draw benefits, while others have cut the amount of money the unemployed can collect.

The cutbacks generally are intended to help shore up unemployment insurance trust funds, which went insolvent in 35 states following the recession that began in 2008. The changes could save hundreds of millions of dollars for businesses that pay unemployment taxes.

President Barack Obama is pushing in the opposite direction. The White House warns that states are engaging in a "damaging erosion" of unemployment benefits. Obama's budget plan would require all states to provide at least 26 weeks of benefits while expanding coverage to more part-time and intermittent workers.

The Republican-led Congress appears unlikely to approve the president's plan during an election year. GOP governors and state lawmakers initiated many of the recent cutbacks to unemployment benefits. And they point to declining unemployment rates as evidence that jobs are getting easier to find.

"When there's more jobs available, it's kind of common sense — you shouldn't need as long as a duration of unemployment benefits," said Missouri Senate Majority Leader Mike Kehoe, a Republican who handled the legislation reducing benefits.

The 1935 Social Security Act prompted states to enact unemployment programs, which typically pay people about half the amount of their previous paychecks. In 1938, more than four-fifths of the states offered benefits for 16 weeks or less. But all states gradually increased their benefits to at least 26 weeks. South Carolina was the last to do so in 1968.

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In 2011, Missouri became one of the first states to reverse course by cutting that to 20 weeks. Last year, the GOP-led Legislature overrode a veto by Democratic Gov. Jay Nixon to further shorten the benefits, linking their duration to the state's unemployment rate. Because unemployment is below 6 percent, people can get no more than 13 weeks of benefits.

The new limit went into effect in January, even though a legal challenge brought by attorneys for the AFL-CIO is now before the Missouri Supreme Court. The lawsuit seeks to block the new law because of an alleged procedural violation by senators.

For some unemployed workers, the new state laws have added another layer of anxiety to an already unsettling situation.

White is one of about 36,000 Missouri workers who filed initial unemployment claims in January. A married father of two, he already has taken out a high-interest loan to help pay for his daughter's college tuition. His wife remains employed as a teacher, but White said the family is starting to fall behind on bills, including electricity. He is afraid he will not be able to make mortgage payments.

"It's been a struggle," White, 43, said while picking up materials about temporary jobs from a state work center in Jefferson City. "I don't have confidence of a job or hirings."

The Missouri law is projected to reduce annual unemployment payouts by $83 million — a reduction of nearly one-fourth.

Neighboring Arkansas reduced its unemployment benefits to 20 weeks under a law that took effect last October. Those shortened benefits run out this month for some people, though the state won't say how many.

South Carolina and Michigan also limit benefits to 20 weeks. Sliding scales linked to unemployment rates have resulted in limits of 16 weeks in Kansas, 14 in Georgia, 13 in North Carolina and 12 in Florida.

Some states also have reduced the maximum weekly payments, narrowed who can qualify and increased work-search requirements that can result in delayed or denied benefits if not met.

"We've experienced a wave of very drastic benefit reductions," said Claire McKenna, a policy analyst at the National Employment Law Project, a New York-based group that serves as an advocate for low-wage workers and the unemployed.

Ohio could be the next state to shorten benefits. A bill by Rep. Barbara Sears would cut benefits to as few as 12 weeks by linking their duration to the unemployment rate. It also would make other benefit changes while trying to replenish an unemployment insurance trust fund that owes $773 million to the federal government.

The legislation is projected to reduce unemployment payments by an average of $475 million annually from 2018 to 2025.

Sears said some people who remain jobless for several months are "kind of settling in on unemployment and riding it until almost the last week before they're re-engaging in the workforce." A shorter benefit period could prompt them to find work, she said.

"When you know you're going to go off of unemployment, there is an overwhelming urge to be less particular maybe about finding the exact job that you lost," said Sears, a Republican from the Toledo area.

Advocates for the poor dispute that assertion. After the reductions in Florida, Georgia and North Carolina, the percentage of adults ages 25 to 54 with jobs in those states grew more slowly than the national average, according to the Economic Policy Institute, a Washington-based liberal think tank.

A coalition of Ohio health and human services groups has warned that shorter unemployment benefits could increase poverty. Some people will turn to food stamps or charities, sell their possessions or their blood plasma and run up credit card debt just to get by, said Lisa Hamler-Fugitt, executive director of the Ohio Association of Foodbanks and co-chair of Advocates for Ohio's Future.

"Once you fall into poverty, the chances that you're going to be able to get back out are going to be pretty difficult," she said.

Business groups contend the benefit cutbacks are an appropriate way for workers to shoulder part of the costs of rebuilding depleted trust funds.

At one point following the recession, states owed a total of $51 billion to the federal government to repay loans for unemployment benefits. To recoup that, the U.S. government temporarily raised the unemployment tax paid by businesses in many of those states.

Besides Ohio, the only states still in federal debt are California, with $6.4 billion, and Connecticut, which owes about $100 million. But the Obama administration says just 20 states have enough reserves in their trust funds to weather a recession for a year. Obama has proposed to gradually increase employer taxes to help solidify the trust funds.

(KA)

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